Mexico - Environmental Project

L=N. 3/60/-kfS Document of The World Bank FOR OFFICIAL USE ONLY Report No. 10005-ME MIt ROP'IC1E COPY Rteport No. 100O5-ME Type: (SAR) K,APLAN, ]-/ X31920 /-4049/ LATEN STAFF APPRAISAL REPORT MEXICO ENVIRONMENTAL PROJECT MARCH 9, 1992 Country Department II Latin America and the Caribbean Region This dotrment has a restdcted disthibudon end may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without Woild Ihuk authorization.  CUR-RENCY EQUIVALENTS Currency Unit Peso (MEX$) US$ 1.00 = 2991 Pesos (May 31, 1991) US$ 1.00 = 3040 Pesos (February 7, 1992) FISCAL YEAR January 1 - December 31 UNITS OF WEIGHTS AND MEASURES Metric British/US Equivalent 1 kilogram (kg) 2.20 pounds (lb) 1 metric ton (m ton) = 2,205 pounds (lb) 1 liter = 0.26 gallons (gal) 1 meter (m) = 3.28 feet (ft) ACRONYMS BANOBRAS National Development Bank for Public Works and Services (Banco Nacional de Obras y Servicios Publicos) CITES Convention on International Trade in Endangered Species of Wild Fauna and Flora CNA National Water Commission (Comision Nacional de Agua) CONADE National Ecology Commission (Comision Nacional de Ecologia) DGAJ General Directorate of Legal Affairs [of SEDUE] (Direccion General de Asuntos Juridicos) DGCERN General Directorate of Ecological Conservation of Natural Resources [SEDUE/SE] (Direccion General de Conservacion Ecologica de los Recursos Naturales) DGNRE General Directorate of Ecological Norms and Regulations [SEDUE/SE] (Direccion General de Normatividad y Regulacion Ecologica) DGPAPC General Directorate of Environmental Promotion and Community Participation [SEDUE/SE] (Direccion General de Promocion Ambiental y Participacion Comunitaria) DGPCCA General Directorate of Prevention and Control of Environmental Contamination [SEDUE/SE] (Direccion General de Prevencion y Control de la Contaminacion) DGSA/SS General Directorate of Environmental Health [Secretariat of Health] (Direccion General de Salud Ambiental) GDP Gross Domestic Product GEF Global Environment Facility GET Global Environment Trust Fund INI National Irstitute for the Indigenous Population (Instieuto Nacional Indigenista) MCMA Mexico City Metropolitan Area PCU Project Coordination Unit PGR Attorney General of the Republic (Procuradoria General de la Republica) SARH Secretariat of Agriculture and Hydraulic Resources (Secretaria de Agricultura y Recursos Hidraulicos) SEDENA Secretariat of National Defense (Secretaria de la Defensa Nacional) SEDUE Secretariat of Urban Development and Ecology (Secretaria de Desarrollo Urbano y Ecologia) SEDUE/SE SEDUE's Undersecretariat for Ecology (Subsecretaria de Ecologia) SEMAR Secretariat of the Navy (Secretaria de la Marina) SHCP Secretariat of Finance and Public Credit (Secretaria de Hacienda y Credito Publico) SINAP National System of Protected Natural Areas (Sistema Nacional de Areas Naturales Protegidas) SNIFF National Information System for Stationary Sources (Sistema Nacional de Informacion de Fuentes Fijas)  FOR OFFICIAL USE ONLY MEXICO ENVIRONMENTAL PROJECT STAFF APPRAISAL REPORT TABLE OF CONTENTS LOAN AND PROJECT SUMMARY .................................. iv - I. INTRODUCTION .............- - II. THE ENVIRQNMENTAL SECTOR .............2 - Key Environmental Issues and Problems .............- 2 - Air Pollution ............. 2 - Water Scarcity and Water Pollution ............. 2 - Soil Erosion ........................................ 3 - Loss of Biological Diversity .............................. 4 - The Legal and Institutional Fram=work ............................ - 4 - Legislation and Regulations ............................... 4 - Institutional Setting ............- 6 - Federal level .................................... 6 - State level ....-.................................. 7 - Key Government Sectoral Functions ............................. - 8 - Pollution Monitoring and Control ........................... - 8 - Water quality ................................... 8 - Air quality ..................................... 8 - Envirorunental laboratories ........................... - 8 - Inspection and vigilance ............................. 9 - Minimizing Negative Environmental Impacts of Investment Projects . ...... - 9 - Environmental impact and risk assessment ................. - 9 - Ecological Planning and Zoning ....................... - 10 - Conservation of Biodiversity ............................. - 10 - Sistema Nacional de Areas Protegidas (SINAP) .... ......... - 10 - Wildlife Trade .................................. - 11 - Government Strategy for the Future ............................. - 12 - Rationale for Bank Involvement ............................... - 13 - Lessons from Experience ............... - 14 - This report is based upon the findings of an appraisal mission that visited Mexico in June 1991. Mission members were Robert Kaplan (mission leader); Sergio Margulis (Natural Resource Economist); John McKenna (Senior Resource Planner); Claudia Alderman (Protected Areas Specialist); Adrian Demayo (Water Pollution Specialist, consultant); Luiz Antonio Prado (Pollution Control Systems Specialist, consultant); Javier de la Maza (Conservation Specialist, consultant); Kenneth Rock (Environmental Assessments Specialist; consultant); Maria Gomez- Taylor (Environmental Laboratories Specialist, consultant); and Ellen Newfield (Information Systems Specialist). Emmanuel Jimenez (Principal Economist); Gunnar Eskeland (Economist); and Joost Draaisma (Economist) also joined the mission for a few days. Robert Kaplan compieted appraisal of the protected areas program on a mission to Mexico in February 1992. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - si - II. WEPR O:C ......................... ,,,.............. - 15 - Origin of th Project . -15 - Proec Obetie Q -16 - Er2ject Description. - 16 - Key Functions Component. - 17 - Monitoring and Control of Pollution .- 17 - Minimizing Negative Environmental Impacts of Investment Projects - 19 - Conserving Biodiversity . - 21 - Modernization of Environmental Management Component .- 24 - Institutional Strengthening Program .- 25 - Decentralization Pilot Program .- 25 - Economic Instruments for the Environment .- 26 - Legislation and Standards Component .- 27 - Legislation. - 27 - Regulation and Standards .- 28 - Studies Component .- 28 - Consolidation of SINAP .- 28 - Creation of Biological Corridors .- 29 - Environmental Effects on Health .- 29 - Environment Futures Study .- 30 - Proiect Costs and Financing ..................,.,.,.,.. - 31 - Cost of the Project .- 31 - Base costs . 31 - Contingency allowances .- 31 - Foreign exchange component .- 32 - Financing Plan .- 32 - Recurrent costs .- 33 - Project Organization and Management ..........................- 34 - Project Management .- 34 - Project Coordination Unt (PCU) .- 34 Monitoring and evaluation .- 34 - Procurement .- 36 - Civil works ................................... - 37 - Goods .. ; - 37 - Consultants .- 37 - Disbursement .- 37 - Accounts and Audits .- 39 - Project Supervision .- 40 - Beleflts and Risks .- 40 - Benefits . ............ - 40 - Risks .. ... - 40 - IV. GREMENTS REACHED AND RECOMMENDATIONS. - 41 -  - iii Annex 1.1: Summary of the General Ecology Law ........................................ - 45 - Annex 1.2: Regulations and Technical Norms of the General Ecology Law ........ 49 - Annex 1.3: Summary of the 1990-1994 National Environmental Protection Program ...................... - 60 - Annex 1.4: Organizational charts of: (a) SEDUE ............................................................... - 62 - (b) SEDUE State Delegation ...................... - 63 - Annex 1.5: Protected Natural Areas iP Mexico ...................... - 64 - Annex 1.6: Letter from the Government of Mexico Describing the Strategy to Transform SEDUE/SE into a Second Tier Institution (Translation) ..... - 68 - Annex 1.7: Coordination Agreement Between SEDUE and SARH (Translation) .... - 74 - Annex 1.8: Program for Decentralizing to SEDUE's State Delegations Review of Some Types of Environmental Impact Assessments .......... ........... - 77 - Annex 1.9: Letter from the Government of Mexico Describing Policy Regarding Protected Natural Areas of Mexico (Translation) ........ ...... - 82 - Annex 2.1: Technical Standards to be Enacted Under the Environmental Project ... - 102 - Annex 2.2: Terms of Reference for the Redesign of the National Water Quality Monitoring Network to be Operated by SEDUE/SE and CNA ........... - 109 - Annex 2.3: Terms of Reference of Studies on Economic Instruments for the Environment to be Commissioned in Year 1 .................. ............... - 114 - Annex 2.4: Eligibility Criteria for Providing GET Support to Protected Areas ...... - 128 - Annex 3.1: Indicators for Monitoring and Evaluation of the Project .......... ......... - 129 - Annex 3.2: Timetable for Initiation, Completion and Discussion with the Bank of Studies to be Carried Out Under the Project ............... ............. - 144 - Annex 3.3: Staff Training .............................................. - 149 - Annex 4.1: Cost of Project Components by Expenditure Category ..................... .- 151 - Annex 4.2: Annual Cost of Project Components ........................................... - 152 - Annex 4.3: Annual Cost by Category of Expenditure ..................................... - 153 - Annex 4.4: Loan Disbursement Schedule .............................................. - 154 - Annex 4.5: GET Grant Disbursement Schedule ............................................ - 155 - Annex 5.1: Documents in the Project File .............................................. - 156 - Mae: IBRD - 23195 IBRD - 23536  - iv - ENVIROMENTAL PROJECT LOAN AND PROJECT SUMMARY Banco Nacional de Obras y Servicios Publicos -- BANOBRAS Guarantor: United Mexican States Ecguilng Ag_ncy: Secretariat for Urban Development and Ecology -- SEDUE Amogunt: US$50 million equivalent; GET Grant US$30 million equivalent loan Terms: Repayment in 15 years, including 5 years of grace, with interest at the Bank's standard variable rate Beneficiaries: SEDUE and State environmental entities